Let’s start off with the purpose of the damage deposit . . .
Purpose of the Damage Deposit
The damage deposit is the only the security the landlord holds in terms of the lease. Security to cover any debts owing and/or damages at the end of the lease.
” . . . the landlord may apply such deposit and interest 30 towards the payment of all amounts for which the tenant is liable under the said lease, including the reasonable cost of repairing damage to the dwelling during the lease period and the cost of replacing lost keys . . . “Clause 5(3)(g) of the Rental Housing Act
Experience shows that the most common debt at the end of a lease is rental arrears. For this reason I’m going to focus on rent arrears in this article.
What can you do when a tenant gets into rent arrears?
Let’s assume the lease is a fixed term lease, which I believe is a safe assumption.
The tenant doesn’t pay the rent in full (or at all) – let’s call this month 1. You take the usual action of calling, emailing, etc but to no avail.
The first formal step – to recover any amounts owed, as well as to cancel the lease agreement – to take is to issue a notice of breach (Letter of Demand (LOD)).
n this article we’re focussing on the process to cancel the lease agreement – not the process of recovery of amounts owed.
The first legal requirement (we’re assuming a fixed term lease here) to legally cancel the lease under the Consumer Protection Act (CPA) is the LOD which puts the tenant on notice that they are in breach of their lease. The LOD needs to give the tenants 20 business days to remedy the breach, i.e. pay the outstanding balance. If they don’t pay in this time frame, you can take the next legal step to end the lease by sending a letter of cancellation or lease..
If the tenants settle the account during this period, the matter is resolved.
The problem only escalates if they don’t settle their debt IN FULL.
The next important date is the 21st business day after you have sent the LOD. If the LOD was send by registered post, then you need to allow 4 business days for delivery. Let’s once again call this a week for simplicity sake.
When can you take the next step, i.e. cancel the lease?
It’s important to put the deadline date for payment of the LOD in context . . .
The rent fell into arrears on 2nd day of month 1 – day 1 being the due date for rent payment.
The LOD wouldn’t have been sent before day 3 or 4 of month 1. This is roughly a week as well.
In summary, the time elapsed will be . . .
- rent follow up – approx 1 week
- LOD delivery by registered post – approx 1 week
- prescribed LOD timeframe for payment – 4 weeks
This adds up to just short of 6 weeks in total before you can take the next legal step, i.e. cancellation of the lease.
It’s important to note that by this time we’re in the next month. It’s safe to assume – and experience bears me out in this – that month 2’s rent also hasn’t been paid. If the tenant wasn’t able to pay month 1’s rent, it’s highly unlikely that they would be able to pay month 2’s rent.
So by the time you reach the deadline of the LOD and can cancel the lease the rent arrears stands at 2 months’ rent owed.
You need to take at least 2 months rent as a damage deposit to cover your landlord.
I hope and trust you found this information useful. Please feel free to post any questions you have below and please feel free to share this post if you know of anyone else that might also find it useful – or share on Facebook or Twitter by clicking on the share links below.